Kimball Electronics Reports Q4 Results; Company Provides Guidance for Fiscal 2025

Rhea-AI Summary

Kimball Electronics (Nasdaq: KE) reported Q4 fiscal 2024 results with net sales of $430.2 million and operating income of $19.6 million (4.6% of net sales). The company generated $48.5 million in cash flow from operations, driven by inventory reductions. For the full fiscal year 2024, net sales totaled $1.71 billion with adjusted operating income of $74.3 million (4.3% of net sales).

CEO Richard D. Phillips noted challenging market conditions and the company's focus on cost structure adjustments and working capital management. Kimball Electronics completed the divestiture of its Automation, Test and Measurement business, strengthening its balance sheet and strategic focus. For fiscal 2025, the company projects net sales between $1.44-$1.54 billion and adjusted operating income of 4.0-4.5% of net sales.

Positive

• Generated $48.5 million in cash flow from operations in Q4
• Reduced inventory by $112 million (25%) year-over-year
• Completed divestiture of Automation, Test and Measurement business, strengthening balance sheet
• Ended Q4 with $78 million in cash and $142.1 million in available borrowing capacity

Negative

• Q4 net sales decreased 13% year-over-year to $430.2 million
• Q4 operating income declined to $19.6 million from $31.4 million in the previous year
• Full-year net sales decreased 6% to $1.71 billion
• Projecting 8% to 14% decline in net sales for fiscal 2025 (excluding divested business)

Financial Analyst

Kimball Electronics' Q4 results reveal a challenging environment for the EMS industry. Net sales decreased 13% year-over-year to $430.2 million, with declines across all verticals. The adjusted operating income margin contracted to 4.9% from 6.3% in the prior year.

Despite headwinds, the company demonstrated strong cash management, generating $48.5 million from operations, primarily driven by inventory reductions. This focus on working capital efficiency is important in the current market conditions.

The FY2025 guidance of $1.44-$1.54 billion in sales implies continued pressure, but the projected adjusted operating margin of 4.0-4.5% suggests resilience in profitability. The divestiture of the Automation, Test and Measurement business should allow for a more streamlined operation and potentially improved margins in the long term.

Industry Expert

The EMS industry is facing significant headwinds, as evidenced by Kimball's results. The 17% decline in medical vertical sales is particularly concerning, potentially indicating broader healthcare spending constraints. The automotive segment's relative resilience (7% decline) suggests that electronic content in vehicles continues to grow, partially offsetting overall market weakness.

Kimball's inventory reduction of $112 million (25%) year-over-year is impressive and indicates strong supply chain management. This agility in adjusting to market conditions is important for EMS providers. The company's focus on new program wins for fiscal 2026 is promising, but the near-term outlook remains challenging as reflected in the guidance.

The divestiture of the Automation, Test and Measurement business aligns with industry trends of focusing on core competencies and could improve overall company performance in the long run.

Fourth Quarter Fiscal 2024 Highlights

• Net sales totaled $430.2 million
• Operating income of $19.6 million, or 4.6% of net sales
• Adjusted operating income of $20.9 million, or 4.9% of net sales
• Cash flow generated from operating activities of $48.5 million, driven by inventory reductions

JASPER, Ind.--(BUSINESS WIRE)-- Kimball Electronics, Inc. (Nasdaq: KE) today announced financial results for the fourth quarter and fiscal year ended June 30, 2024.

	Three Months Ended								Fiscal Year Ended
	June 30,								June 30,
(Amounts in Thousands, except EPS)		2024				2023				2024				2023
Net Sales	$	430,158			$	496,141			$	1,714,510			$	1,823,429
Operating Income (1)	$	19,608			$	31,449			$	49,277			$	87,729
Adjusted Operating Income (non-GAAP) (2)	$	20,944			$	31,480			$	74,311			$	88,218
Operating Income %		4.6	%			6.3	%			2.9	%			4.8	%
Adjusted Operating Income (non-GAAP) %		4.9	%			6.3	%			4.3	%			4.8	%
Net Income (1)	$	7,543			$	19,202			$	20,511			$	55,831
Adjusted Net Income (non-GAAP) (2)	$	8,361			$	19,041			$	35,846			$	55,949
Diluted EPS (1)	$	0.30			$	0.76			$	0.81			$	2.22
Adjusted Diluted EPS (non-GAAP) (2)	$	0.33			$	0.76			$	1.42			$	2.23

(1)	Results (GAAP) in the June 30, 2024 three months and fiscal year periods include asset and goodwill impairment related to the divestiture of the Automation, Test and Measurement business.
(2)	A reconciliation of GAAP and non-GAAP financial measures is included below.

Commenting on today’s announcement, Richard D. Phillips, Chief Executive Officer, stated, “Q4 was another quarter focused on ‘controlling what we can control’. The operating environment for the EMS industry remains challenged and many contract manufacturing organizations, Kimball included, have adjusted expectations on continued weakness in end market demand. In the verticals we serve, the pull back has been more significant than originally anticipated, and we continue to appropriately adjust our cost structure to maintain competitiveness with stable operating margins, improve working capital management with lower inventory levels, and generate positive cash flow.”

Mr. Phillips continued, “Earlier this month, we announced the completion of the divestiture of the Automation, Test and Measurement business. Closure on the sale represents a significant milestone for our Company, and another important step toward sharpening our strategic focus and returning to profitable growth and stronger performance. Proceeds from the sale, combined with actions taken to navigate the current environment, have strengthened our balance sheet with increased liquidity and financial flexibility. In addition, recent new program wins, which will start to impact fiscal 2026, make us excited for the future.”

The Company ended the fourth quarter of fiscal 2024 with cash and cash equivalents of $78.0 million and borrowings outstanding on credit facilities of $294.8 million, including $235.0 million classified as long term, and $142.1 million of borrowing capacity available. Capital expenditures were $9.1 million in the fourth quarter, and the Company invested $3 million to repurchase 136,000 shares of common stock.

Fiscal Year 2024 Highlights:

• Net sales totaled $1,714.5 million, the second highest year in the history of the Company
• Adjusted operating income of $74.3 million, or 4.3% of net sales
• Inventory reductions of $112 million, or 25%, year-over-year
• Cash flow generated from operating activities of $73 million

Net Sales by Vertical Market for Q4 and Full Year Fiscal 2024:
	Three Months Ended															Fiscal Year Ended
	June 30,															June 30,
(Amounts in Millions)	2024			*			2023			*			Percent Change			2024			*			2023			*			Percent Change
Automotive (1)	$	211.7		49	%		$	228.5		46	%		(7	)%		$	826.4		48	%		$	843.8		46	%		(2	)%
Medical (1)		102.2		24	%			123.6		25	%		(17	)%			425.7		25	%			500.7		28	%		(15	)%
Industrial (1)		116.3		27	%			144.0		29	%		(19	)%			462.4		27	%			478.9		26	%		(3	)%
Total Net Sales	$	430.2					$	496.1					(13	)%		$	1,714.5					$	1,823.4					(6	)%
* As a percent of Total Net Sales
(1) Beginning in fiscal year 2024, miscellaneous sales previously reported in Other are now reported in the respective three end market verticals; all prior periods have been recast to conform to current period presentation
– Automotive includes electronic power steering, body controls, automated driver assist systems, and electronic braking systems
– Medical includes sleep therapy and respiratory care, image guided therapy, in vitro diagnostics, drug delivery, AED, and patient monitoring
– Industrial includes climate controls, automation controls, optical inspection, and public safety

Jana T. Croom, Chief Financial Officer, commented, “Fiscal 2024 was hard fought with a challenging operating environment combined with divesting the AT&M business, which was not a small undertaking for our Company. I would like to thank the entire Kimball team for their efforts involved in closing the transaction and ensuring a smooth transition. Looking to fiscal 2025, we expect macro headwinds to persist. We will balance these pressures with cost controls, a capital allocation strategy focused on longer-term growth, lasting customer relationships, and opportunistic share repurchases.”

Fiscal Year 2025 Guidance

• Net sales in the range of $1.440 - $1.540 billion, an 8% to 14% decline year-over-year when excluding net sales from Automation, Test and Measurement. ^(a)
• Adjusted operating income of 4.0% - 4.5% of net sales. ^(b)
• Capital expenditures of $40 - $50 million.

(a)	A reconciliation of net sales excluding Automation, Test and Measurement is included in the Non-GAAP Reconciliations section.
(b)	Fiscal year 2025 guidance reflects a change in our adjusted operating income calculation beginning in fiscal year 2025, which will exclude stock compensation expense, currently included in adjusted operating income. This change better aligns our presentation with others in our industry. Fiscal year 2024, under this new calculation, by comparison, would have been 4.8%. A reconciliation of GAAP and non-GAAP financial measures is included below.

Forward-Looking Statements
Certain statements contained within this release are considered forward-looking, including our guidance, under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “expect,” “should,” “goal,” “predict,” “will,” “future,” “optimistic,” “confident,” and “believe.” Undue reliance should not be placed on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. These forward-looking statements are subject to risks and uncertainties including, without limitation, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine, global health emergencies, availability or cost of raw materials and components, foreign exchange rate fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the company are contained in its Annual Report on Form 10-K for the year ended June 30, 2023.

Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. The non-GAAP financial measures contained herein include constant currency growth, net sales excluding Automation, Test & Measurement, adjusted selling and administrative expenses, adjusted operating income, adjusted net income, adjusted diluted EPS, and ROIC. Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the Reconciliation of Non-GAAP Financial Measures section below. Management believes these measures are useful and allow investors to meaningfully trend, analyze, and benchmark the performance of the company’s core operations. The company’s non-GAAP financial measures are not necessarily comparable to non-GAAP information used by other companies.

About Kimball Electronics, Inc.
Kimball Electronics is a global, multifaceted manufacturing solutions provider of electronics and diversified contract manufacturing services to customers around the world. From our operations in the United States, China, Mexico, Poland, Romania, and Thailand, our teams are proud to provide manufacturing services for a variety of industries. Recognized for a reputation of excellence, we are committed to a high-performance culture that values personal and organizational commitment to quality, reliability, value, speed, and ethical behavior. Kimball Electronics, Inc. (Nasdaq: KE) is headquartered in Jasper, Indiana.

To learn more about Kimball Electronics, visit www.kimballelectronics.com.

Conference Call / Webcast
Date:			August 14, 2024
Time:			10:00 AM Eastern Time
Live Webcast:			investors.kimballelectronics.com/events-and-presentations/events
Dial-In #:			877-407-8293 (or 201-689-8349)

For those unable to participate in the live webcast, the call will be archived at investors.kimballelectronics.com.

Lasting relationships. Global success.

Financial highlights for the fourth quarter and fiscal year ended June 30, 2024 are as follows:
Condensed Consolidated Statements of Income
(Unaudited)	Three Months Ended
(Amounts in Thousands, except Per Share Data)	June 30, 2024							June 30, 2023
Net Sales	$	430,158			100.0	%		$	496,141			100.0	%
Cost of Sales		393,420			91.5	%			446,460			90.0	%
Gross Profit		36,738			8.5	%			49,681			10.0	%
Selling and Administrative Expenses		15,890			3.6	%			18,444			3.7	%
Other General Expense (Income)		—			—	%			(212	)		—	%
Restructuring Expense		764			0.2	%			—			—	%
Asset Impairment		476			0.1	%			—			—	%
Operating Income		19,608			4.6	%			31,449			6.3	%
Interest Income		155			—	%			65			—	%
Interest Expense		(5,380	)		(1.3	)%			(5,473	)		(1.1	)%
Non-Operating Income (Expense), net		(918	)		(0.2	)%			466			0.1	%
Other Income (Expense), net		(6,143	)		(1.5	)%			(4,942	)		(1.0	)%
Income Before Taxes on Income		13,465			3.1	%			26,507			5.3	%
Provision for Income Taxes		5,922			1.3	%			7,305			1.4	%
Net Income	$	7,543			1.8	%		$	19,202			3.9	%
Earnings Per Share of Common Stock:
Basic	$	0.30						$	0.77
Diluted	$	0.30						$	0.76
Average Number of Shares Outstanding:
Basic		25,064							25,009
Diluted		25,246							25,161

(Unaudited)	Fiscal Year Ended
(Amounts in Thousands, except Per Share Data)	June 30, 2024							June 30, 2023
Net Sales	$	1,714,510			100.0	%		$	1,823,429			100.0	%
Cost of Sales		1,574,253			91.8	%			1,667,264			91.4	%
Gross Profit		140,257			8.2	%			156,165			8.6	%
Selling and Administrative Expenses		66,626			4.0	%			68,648			3.8	%
Other General Expense (Income)		(892	)		(0.1	)%			(212	)		—	%
Restructuring Expense		2,386			0.1	%			—			—	%
Goodwill Impairment		5,820			0.3	%			—			—	%
Asset Impairment		17,040			1.0	%			—			—	%
Operating Income		49,277			2.9	%			87,729			4.8	%
Interest Income		638			—	%			153			—	%
Interest Expense		(22,839	)		(1.3	)%			(16,263	)		(0.9	)%
Non-Operating Income (Expense), net		(1,877	)		(0.1	)%			3,125			0.2	%
Other Income (Expense), net		(24,078	)		(1.4	)%			(12,985	)		(0.7	)%
Income Before Taxes on Income		25,199			1.5	%			74,744			4.1	%
Provision for Income Taxes		4,688			0.3	%			18,913			1.0	%
Net Income	$	20,511			1.2	%		$	55,831			3.1	%
Earnings Per Share of Common Stock:
Basic	$	0.82						$	2.24
Diluted	$	0.81						$	2.22
Average Number of Shares Outstanding:
Basic		25,079							24,904
Diluted		25,278							25,076

Condensed Consolidated Statements of Cash Flows	Fiscal Year Ended
(Unaudited)	June 30,
(Amounts in Thousands)		2024				2023
Net Cash Flow provided by (used for) Operating Activities	$	73,217			$	(13,804	)
Net Cash Flow used for Investing Activities		(46,521	)			(90,467	)
Net Cash Flow provided by Financing Activities		8,974				99,179
Effect of Exchange Rate Change on Cash, Cash Equivalents, and Restricted Cash		(755	)			(895	)
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash		34,915				(5,987	)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		43,864				49,851
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	78,779			$	43,864

	(Unaudited)
Condensed Consolidated Balance Sheets	June 30, 2024			June 30, 2023
(Amounts in Thousands)
ASSETS
Cash and cash equivalents	$	77,965		$	42,955
Receivables, net		282,336			308,167
Contract assets		76,320			78,798
Inventories		338,116			450,319
Prepaid expenses and other current assets		44,682			49,188
Assets held for sale		27,587			—
Property and Equipment, net		269,659			267,684
Goodwill		6,191			12,011
Other Intangible Assets, net		2,994			12,335
Other Assets, net		82,069			38,262
Total Assets	$	1,207,919		$	1,259,719
LIABILITIES AND SHARE OWNERS’ EQUITY
Current portion of borrowings under credit facilities	$	59,837		$	46,454
Accounts payable		213,551			322,274
Advances from customers		30,151			33,905
Accrued expenses		63,189			72,515
Liabilities held for sale		8,594			—
Long-term debt under credit facilities, less current portion		235,000			235,000
Long-term income taxes payable		3,255			5,859
Other long-term liabilities		53,881			19,718
Share Owners’ Equity		540,461			523,994
Total Liabilities and Share Owners’ Equity	$	1,207,919		$	1,259,719

Other Financial Metrics
(Unaudited)
(Amounts in Millions, except CCD)
	At or For the
	Three Months Ended						Fiscal Year Ended
	June 30,						June 30,
	2024			2023			2024			2023
Depreciation and Amortization	$	9.5		$	8.6		$	38.0		$	32.4
Stock-Based Compensation	$	1.8		$	1.6		$	7.2		$	6.9
Cash Conversion Days (CCD) (1)		100			94
Open Orders (2)	$	714		$	798

(1)	Cash Conversion Days (“CCD”) are calculated as the sum of Days Sales Outstanding plus Contract Asset Days plus Production Days Supply on Hand less Accounts Payable Days and less Advances from Customers Days. CCD, or a similar metric, is used in our industry and by our management to measure the efficiency of managing working capital.
(2)	Open Orders are the aggregate sales price of production pursuant to unfulfilled customer orders.

Select Financial Results of Automation, Test and Measurement
(Unaudited)
(Amounts in Millions)
	Three Months Ended						Fiscal Year Ended
	June 30,						June 30,
	2024			2023			2024				2023
Net Sales	$	14.8		$	28.0		$	45.7			$	68.6
Operating Income (Loss) (1)	$	2.0		$	6.6		$	(22.2	)		$	6.7

(1)	Includes asset impairment of $0.5 million for the three months ended June 30, 2024 and goodwill impairment of $5.8 million and asset impairment of $17.0 million for the fiscal year ended June 30, 2024. Also includes allocated corporate overhead expenses.

Reconciliation of Non-GAAP Financial Measures
(Unaudited, Amounts in Thousands, except Per Share Data)
	Three Months Ended								Fiscal Year Ended
	June 30,								June 30,
		2024				2023				2024				2023
Net Sales Growth (vs. same period in prior year)		(13	)%			33	%			(6	)%			35	%
Foreign Currency Exchange Impact		—	%			—	%			—	%			(3	)%
Constant Currency Growth		(13	)%			33	%			(6	)%			38	%
Net Sales, as reported	$	430,158			$	496,141			$	1,714,510			$	1,823,429
Net Sales from Automation, Test & Measurement		14,771				28,031				45,674				68,608
Net Sales excluding Automation, Test & Measurement	$	415,387			$	468,110			$	1,668,836			$	1,754,821
Selling and Administrative Expenses, as reported	$	15,890			$	18,444			$	66,626			$	68,648
SERP		(96	)			(243	)			(680	)			(701	)
Adjusted Selling and Administrative Expenses	$	15,794			$	18,201			$	65,946			$	67,947
Operating Income (Loss), as reported	$	19,608			$	31,449			$	49,277			$	87,729
SERP		96				243				680				701
Legal Settlements (Recovery)		—				(212	)			(892	)			(212	)
Restructuring Expense		764				—				2,386				—
Goodwill Impairment		—				—				5,820				—
Asset Impairment		476				—				17,040				—
Adjusted Operating Income	$	20,944			$	31,480			$	74,311			$	88,218
Adjusted Operating Income %										4.3	%			4.8	%
Stock Compensation Expense										7,185				6,914
Adjusted Operating Income - FY25 Guidance Comparison									$	81,496			$	95,132
Adjusted Operating Income % - FY25 Guidance Comparison										4.8	%			5.2	%
Net Income (Loss), as reported	$	7,543			$	19,202			$	20,511			$	55,831
Adjustments After Measurement Period on GES Acquisition		—				—				—				279
Legal Settlements (Recovery), After-Tax		—				(161	)			(676	)			(161	)
Restructuring Expense, After-Tax		580				—				1,810				—
Goodwill Impairment, After-Tax		—				—				4,414				—
Asset Impairment, After-Tax		238				—				9,787				—
Adjusted Net Income	$	8,361			$	19,041			$	35,846			$	55,949
Diluted Earnings per Share, as reported	$	0.30			$	0.76			$	0.81			$	2.22
Adjustments After Measurement Period on GES Acquisition		—				—				—				0.01
Legal Settlements (Recovery)		—				—				(0.03	)			—
Restructuring Expense		0.02				—				0.07				—
Goodwill Impairment		—				—				0.18				—
Asset Impairment		0.01				—				0.39				—
Adjusted Diluted Earnings per Share	$	0.33			$	0.76			$	1.42			$	2.23
									Fiscal Year Ended
									June 30,
										2024				2023
Operating Income									$	49,277			$	87,729
Goodwill Impairment										5,820				—
SERP										680				701
Legal Recovery										(892	)			(212	)
Restructuring Expense										2,386				—
Asset Impairment										17,040				—
Adjusted Operating Income (non-GAAP)									$	74,311			$	88,218
Tax Effect										16,332				22,235
After-tax Adjusted Operating Income									$	57,979			$	65,983
Average Invested Capital (1)									$	782,093			$	701,364
ROIC										7.4	%			9.4	%

(1)	Average invested capital is computed using Share Owners’ equity plus current and non-current debt less cash and cash equivalents averaged for the last five quarters.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813648435/en/

Andrew D. Regrut

Treasurer and Investor Relations Officer

812.827.4151

Investor.Relations@kimballelectronics.com

Source: Kimball Electronics, Inc.

FAQ

What were Kimball Electronics' (KE) Q4 fiscal 2024 financial results?

Kimball Electronics reported Q4 fiscal 2024 net sales of $430.2 million and operating income of $19.6 million, or 4.6% of net sales. Adjusted operating income was $20.9 million, or 4.9% of net sales.

How much cash flow did Kimball Electronics (KE) generate in Q4 2024?

Kimball Electronics generated $48.5 million in cash flow from operating activities in Q4 fiscal 2024, primarily driven by inventory reductions.

What is Kimball Electronics' (KE) financial guidance for fiscal 2025?

For fiscal 2025, Kimball Electronics projects net sales between $1.44-$1.54 billion, representing an 8% to 14% decline year-over-year when excluding divested business. Adjusted operating income is expected to be 4.0-4.5% of net sales.

How did Kimball Electronics' (KE) inventory levels change in fiscal 2024?

Kimball Electronics reduced inventory by $112 million, or 25%, year-over-year in fiscal 2024, contributing to improved working capital management and cash flow generation.